RBI Keeps Key Rates Unchanged ,Sees Space For More Accommodation

01 December, Mumbai

Reserve Bank has kept the key policy rates unchanged in its fifth bi-monthly monetary policy review today. The repo rate stayed at 6.75 per cent, the reverse repo rate at 5.75 percent, Bank rate at 7.75 percent and the Cash Reserve Ratio at 4 percent.

The GDP forecast is also unchanged at 7.4 per cent with a moderate downward bias, with the apex bank saying that the economy has showed signs of early recovery.

RBI Governor Raghuram Rajan said that they will use the space for further accommodation, when available, while keeping the economy anchored to the projected disinflation path that should take inflation down to 5 per cent by March 2017.

Rajan said, RBI will monitor developments on the commodity prices, including food and oil and external developments in its future policy formulations. He also said that RBI will closely watch the impact of the 7th Pay Commission on inflation for future policy deliberations.

The RBI Governor also said that Inflation is expected to broadly follow the path set out in the September review with risks slightly on the downside.

He also expressed anguish at the banks’ reluctance to pass on the benefits of the earlier rate cut actions to the borrowers. He said, the median decrease in the base rates over the course of the year has only been 0.60 per cent as against the RBI’s 1.25 per cent cut in the repo rate since January.